Regression Table Coefficient Constant 41.01629148 DISTANCE 0.077445525 SW=No 77.
ID: 3172862 • Letter: R
Question
Regression Table Coefficient
Constant 41.01629148
DISTANCE 0.077445525
SW=No 77.04166986
Interaction(DISTANCE,SW=No) -0.012412868
The figure above shows regression output for the model: Fare=a + b1 * Distance + b2 * (SW=No) + b3 * Distance * (SW=No).
What is the correct economical interpretation for b1 = 0.077? Select the best option. (Hint: To fully understand all coefficients in the model, the key is to write out a regression model for routes where SW=yes. Then write out the regression model for routes where SW=no. Refer back to the residency notes as needed. Simplify these two regression formulas, then the economic interpretation of b1 should become clear.)
a)There is no economical interpretation.
b)When you increase distance by one mile, fare increases on average by 7.7 cents; everything else held constant.
c)7.7 cents is the average increase in fare per additional mile on routes where Southwest is absent.
d) 7.7 cents is the average increase in fare per additional mile on routes where Southwest is present.
Explanation / Answer
The regression equation is
Fare=41.01629148+ 0.077445525*Distance+77.04166986*(SW=No) -0.012412868*Distance * (SW=No)
economical interpretation for b1 = 0.077 :
b)When you increase distance by one mile, fare increases on average by 7.7 cents; everything else held constant.